A compensation and benefits package can position a small business as an employer of choice, helping your company appeal to higher-quality workers. Workers look for compensation that goes beyond cash when considering whether a job offers them security, stability and a future. A well-considered benefits and compensation package helps you attract and retain workers, and it doesn’t have to break your budget.

Compensation

Compensation differs from benefits in that it is an earned income for work performed. Examples of compensation include wages, salaries, tips, bonuses and commissions. Discretionary bonuses for individuals, workers or the entire company, such as a profit-sharing plan, can be classified as compensation.

Benefits

Benefits are cash and non-cash rewards in addition to compensation. Benefits include health insurance, paid time off, wellness programs, 401k match, pension, day care, company car, frequent flyer miles, hotel points and contests. Some employers pay for employees’ health insurance, while others offer workers the chance to participate in an employee-sponsored plan that reduces employees’ costs. Your human resources manager, legal counsel or health insurance provider should be able to tell you what your legal obligations are regarding offering health insurance to your employees.

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Voluntary Benefits

To help control labor costs while trying to attract and keep workers, employers may offer voluntary benefits employees can purchase at a low cost through a company plan. These include programs such as dental, vision, cancer and other forms of discretionary insurance. Your health insurance provider can help you create an employee program that lets you offer additional benefits and meets your legal obligations.

HSA, HRA and FSA

A health savings account is an individual account into which an employer and/or employee puts money, allowing the employee to spend that money on the health care he desires. HSAs are not subject to income tax when the money is deposited, and they benefit workers enrolled in high-deductible insurance plans. If the employee does not use all of his funds, the remaining money rolls over to the next year, which encourages employees to spend less each year on questionable health care than they might with a use-it-or-lose-it account.

Unlike HSAs, health reimbursement arrangements are owned by the employer, who funds them through a third-party provider. HRAs give you more control over how employees can spend the money. Flexible savings accounts, or FSAs, are also employer-owned, but employees can contribute to them. They are tied to an insurance plan and have a use-it-or-lose-it component.

Check with a benefits broker to determine which is right for you; you may find that offering all three plans is your best option.

Paid Time Off

Paid time off includes personal, sick and vacation days. Some companies allow unused days to roll over from year to year, while others have a use-it-or-lose-it policy to prevent employee burnout or long vacations. You can give employees a set amount of PTO as part of their contracts or have them earn days as they work. For example, if you offer 12 days of PTO annually, employees earn one day of PTO for each month worked. Using this system, you may be obligated to offer a smaller severance amount when an employee leaves. Some companies offer a wellness buyback for unused sick and personal days. If you pay employees 50 percent of the value of their unused days at the end of the year, based on their salary, your employees get extra cash and you get work days for 50 percent of the regular pay.

Legalities

Small business owners must take care to meet all of their benefits and compensation obligations. Even voluntary benefits might be governed, such as a requirement that they be offered to all employees, not just management. You may be allowed to limit the participation of some employees using a vesting period. This would include making employees eligible for participation in certain benefits only after they have been with you for 90 days or six months. Meet with a qualified human resources professional, a benefits and comp company and/or an employment attorney to ensure you provide and implement benefits and compensation packages legally.

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About the Author

Sam Ashe-Edmunds has been writing and lecturing for decades. He has worked in the corporate and nonprofit arenas as a C-Suite executive, serving on several nonprofit boards. He is an internationally traveled sport science writer and lecturer. He has been published in print publications such as Entrepreneur, Tennis, SI for Kids, Chicago Tribune, Sacramento Bee, and on websites such Smart-Healthy-Living.net, SmartyCents and Youthletic. Edmunds has a bachelor's degree in journalism.